Why Local Businesses Need to Modernize Payments

Every local business knows how important it is to delight customers to get them to make a purchase. But what about the purchase itself? The moment of purchase is often the defining interaction with a customer, and if you nail it, those customers will be more likely to return soon.

To double down on convenience, businesses must remove friction from transactional experiences. The good news is, there are so many more convenient payment options that local businesses can provide to create a seamless customer experience. From contactless payments to digital wallets to card readers to text-to-pay—customers love options. 

And if your small or local business isn’t giving them choices, more than 1 in 4 people will abandon a purchase if their preferred payment method isn’t available. 

In fact, in our State of Payments report, convenient payment options were the second most important factor (41%) when choosing a local business, after customer service. 

When used correctly, the right payment methods can grow revenue, increase retention, and improve customer experience. In this guide, we share everything small and local businesses should know about building a modern payment program. You’ll learn:

• How consumer payments have evolved over the last few years
• What in-store and online payment processes will help you most
• Why you should use text-to-pay, contactless payments, card readers, and more

How Payment Processing Has Evolved 

The world of payment processing has come a long way since the early days of trade and barter. To get a sense of where the future of payment processing is going, it’s important to know how far we’ve come with the evolution of payment systems. 

For business owners, cash has historically been king. Cash payment systems don’t require any additional fees, making it cost-effective for businesses and a real-time income booster. This no-frills medium of transferring funds is still a go-to, particularly for low-value transactions. 

However, technology has completely changed (and continues to change) the game for making payments faster and less bulky, leading to higher expectations from customers. In 1979, Visa introduced the credit card terminal, revolutionizing the payment processing scene forever. Debit card and credit card payments are widely accepted across the United States, and the number of credit card accounts continues to rise, due in part to their efficiency for both online and in-store payments.

Throughout this time, convenience has been the driving force for innovation as payment processing companies continue to create better and faster ways for customers to purchase and businesses to profit. In our digital age, electronic payment systems are naturally increasing. 

With millions of people using mobile devices, and with the majority of today’s customers choosing to make non-cash purchases and even opting not to carry much cash (if any) at all, payment systems with smartphone-initiated financial transactions are growing at incredible speed. The most recent developments include mobile wallets, flexible customer financing options, and in-app purchasing methods.

Many businesses still assume that letting customers swipe credit cards or pay in cash will cover the bases. However, it’s unsurprising that if those are the only two options you provide, you’re actually missing 31% of US consumers’ top choices. 

Choosing the right payment processing system can make a big difference in how customers feel when they pay you, how much you earn, and how quickly you receive your funds.

Physical Store vs. Online Payment Processing 

Gone are the days when customers had to trek to a store to make a purchase. More customers are doing the majority of their shopping online, but most businesses still need to be able to take payments in-store as well.

Want to offer customers the best of both worlds? If they haven’t already, business owners should look into buy online, pick up in-store (BOPIS) options. While the pandemic incited a massive increase in buying online, time has proven that BOPIS isn’t just a trend. It’s here to stay. 

While adoption rates for BOPIS in 2016 were above 40%, they’re expected to rise to 90% by 2024.

Blending the convenience of online payments with the immediate gratification of picking up locally is a strategy that’s improving sales and customer satisfaction globally. Outside of serious growth for retailers, BOPIS also offers incredible benefits to shoppers by reducing friction at checkout. 

Understanding Contactless Payments

Since the pandemic, contactless payments have become our new normal—they are not just a luxury, but expected. 

Approximately 78% of consumers would like local businesses to continue offering contactless payment options. 

In considering which to use and how, it’s important to remember that contactless payments should improve your specific checkout and transaction process rather than increase friction. Local businesses need to analyze their own specific processes and friction points from a consumer perspective and understand clearly what various contactless payment methods are and do. 

More importantly, they need to consider their target consumer, that consumer’s particular habits, and how that consumer might interact with any given payment method.

Text-to-Pay

Text-to-pay is perhaps the easiest and most up-and-coming method for payment processing.

As its name suggests, customers can pay via a simple text message. This payment method is also sometimes referred to as SMS payment and is rapidly gaining traction–especially with newer and younger consumers.

For example, consumers under the age of 55 are more likely to try new forms of payment, such as paying through a secure link. 

Card-on-File 

Storing cards on file is a commonly used practice where customers give local businesses permission to store their payment information in a safe and secure place. 

This allows businesses to charge their returning customers’ credit cards for any purchases they make in the future. This payment method saves customers (and businesses) a significant amount of time–both in-store and online. 

Of course, with the storing of sensitive information, businesses need to be aware of their customers’ concerns around information handling and protection. 

Text-to-Pay for Local Businesses

Text-to-pay is a game changer in its optimization of convenient payment and tracking, for both customers and the local businesses they patronize. This option is significantly increasing local businesses’ chances of collecting outstanding accounts across the marketplace.

Local businesses have also found text-to-pay extremely useful in giving customers an easy and immediate way to pay while maintaining personalization and strengthening customer relationships.

What is Text-to-Pay?

Text-to-pay allows businesses to send customers a message with a short link that leads them to an online page to pay their invoice. They’re given multiple options in how they’d prefer to pay, including by credit card, bank transfers, or even mobile wallets—like Apple Pay or Google Pay. The right platform can even allow them to set up low or np-interest payment plans, all from a simple text message.

Using text-to-pay allows your business to receive money from your customers (and even other businesses) in only seconds. It also helps you trim your accounts receivable down significantly, saving you the headache of outstanding bills.

The variety of options text-to-pay allows makes for a highly flexible and consumer-focused method of billing. That means going paperless efficiently, and getting paid more dependably. 

Also, because text-to-pay takes place in a text thread, local businesses benefit from the ability to send digital receipts and continue a conversation with their customers—even after a bill has been paid. 

Text-to-Pay Payment Processing Use Cases

Franchise owner Justin Miller from Wow 1 Day Painting was looking for a last-resort method to collect outstanding accounts to pay his employees when he came across SMS payments. With text-to-pay, Justin saw incredibly fast results: 

“Just two months after my team began using Podium Payments, our accounts receivable were reduced to zero! Thanks to Podium Payments, our average time-to-payment this month is just 24 minutes!”

Text-to-pay has helped Justin not only collect a significant portion of outstanding accounts and set a precedent for payment collection, but has also decreased the headache and stress of future payment collection for himself and his employees. 

Text-to-pay can also help your business do good while earning more.

In an effort to be more environmentally friendly, Adam’s Pest Control started accepting only credit card payments. To make this transition easier on their customers, they needed a way to process transactions that sped up collections—without throwing a wrench in their customers’ schedules.

Recalling that their customers preferred text to communicate, the staff at Adam’s Pest Control utilized text to remind customers of outstanding balances and provide directions on how to pay them. Instead of just considering payments transactions, they saw them as opportunities to shorten collection time, reduce operational costs, and even strengthen their relationships with their customers through personal, friendly communication that continued beyond the bill.

Best Practices & Compliance with Text-to-Pay Payment Processing

Using text-to-pay is very straightforward and can boost your bottom line almost as soon as you implement it. Read on to learn how to use text-to-pay successfully and compliantly. 

Enable Your Business To Text

To implement text-to-pay, you first need to make sure that your business number can send and receive messages. 

Regardless, you always want to set up your voice line for texting instead of getting a new number. Why? This allows customers to text and call you at one number instead of multiple numbers, which can be confusing. If you don’t want to use your personal line, try using a service such as Google Voice. Google Voice can help you designate a work number while still receiving messages directly to your device. 

Train Employees 

After your line is set up, it’s time to make texting the status quo for your brand. To do this, make sure your staff is trained to use your texting software well. You should also train your employees on common best practices for answering inquiries, solving problems, and completing transactions through messaging. This involves tone, message structuring, timing, and more.  

Offer Multiple Payment Options

Before you set up your payments, you make it possible to accept various payment methods with the payment links you send. Always think carefully about the payment methods your clients will want to use, such as direct deposit, ACH, e-check, Apple Pay, Google Pay, credit cards, debit cards, etc. Your payment method selection should be heavily customer-centric and reflective of customers’ experiences with you. 

Set Up Text-Pay

With the right text messaging platform, setting up your text-to-pay is intuitive and headache-free. If you have the right tools, you can even set up your payment system to give customers the option of making advance payments via messaging. 

Start Receiving Text Payments 

For your text payments to be successful, you need to let your customer know that you’ve transitioned. Think about including a message in your first text marketing campaign to let them know about your new payment option and include plenty of details. 

Don’t forget to set expectations as well. Tell your customers how and when they will be getting payment requests. This way, they will be able to watch for them and pay quickly when they come. 

If your customers simply forget to pay an invoice, (and this happens), the way you follow up matters. Sending a text is so much less awkward and more convenient than following up via phone call, email, or paper reminder. There’s no doubt that your customers will appreciate a friendly reminder before you make motions to escalate an overdue bill.

Digital & Mobile Wallets for Local Businesses

As customers increasingly gravitate toward a streamlined checkout process and face growing concerns over cyber safety and payment processing security, digital and mobile wallets are coming to the fore, alongside text, in terms of carrying out optimized transactions with local businesses. 

What are Mobile Wallets?

Mobile wallets are virtual wallets that store payment information on a mobile device. They are offered by many companies, but some of the most commonly used are Apple Pay and Google Pay. 

Mobile wallets constitute a super convenient, safe payment processing option in a world that uses cash less and less. With more customers opting to not even carry around physical cards, mobile wallets are becoming their primary mode of payment. 

How to Use Apple Pay, Google Pay, and More

Hearing the words “Apple Pay” or “Google Pay” can be slightly stress-inducing for a local business that hasn’t yet made a significant technological transition. However, setting up mobile wallets is actually incredibly easy. iPhone owners can input their credit or debit card into their mobile wallet by clicking on their Apple Pay app. Android users can do the same with Google Pay. 

Other forms of payment or documentation can also be added to mobile wallets, such as airline tickets, gift cards, insurance cards, and more. These can usually be added by clicking on a link or prompt after purchase. Businesses large and small can also all accept Google Pay easily, and transactions are quick and convenient.

There are two main ways to accept Google Pay, Apple Pay, and other mobile payment options:

• You can opt for an NFC-enabled terminal inside your store. Mobile wallet apps rely on this NFC (near-field connection) technology to connect with your customers’ smartphones.
• You can also accept Google Pay when clients are not physically present. You can integrate it as an option on your e-commerce platform or you can offer Google Pay and Apple Pay SMS payment. You’ll need to find a text-to-pay provider that supports Apple Pay and Google Pay, like Podium. 

Once you set up text-to-pay with Google Pay and Apple Pay, you may want to expand your offerings for these payment methods. Google Pay offers an API for Passes that lets your users store gift cards, offers, and loyalty programs in the application. 

For more information on text-to-pay with Google Pay, check out this resource; for more on text-to-pay with Apple Pay, try this one.

Digital & Mobile Wallet Use Cases

Digital and mobile wallet tools allow customers to pay conveniently from their phones anywhere and can consequently be used for a number of purposes. Common use cases include:

Bill Pay 

Digital wallets allow users to pay bills, such as water, electricity, etc., smoothly and securely, even sometimes increasing cost-effectiveness. Being able to use this feature in an automatic way can be a game-changer for customers with a large and varying bill span. 

Bill Split 

Split-bill functionality is becoming an increasingly popular way for groups to share a bill at retailers, recreational businesses, restaurants, and more. Consider how this feature might optimize your customer experience. 

Rewards, Discounts, and Coupons

Mobile wallets are very useful in increasing loyalty to featured providers by offering personalized discounts and rewards to users. 

Financial Guidance 

With mobile wallets, businesses can offer employees and customers access to a wide variety of financial assistance and tools. These can include gamified financial guidance and product offerings, insurance, and loyalty programs. 

Best Practices for a Modern Merchant 

The key to a successful digital and mobile wallet payment process, as always, is transparency. Businesses should ensure that customers know exactly what they are getting into when their payments are processed digitally, and how their information will be stored and used.

Businesses tend to get into trouble when they mishandle customers’ private information or fail to communicate terms effectively to their customers. Best practices include:

• Alerting customers to changes within your app or offerings
• Communicating clearly the terms of your payments from the beginning
• Sending relevant alerts and updates
• Posting information safety and security practices in a visible place
• Regularly working to increase the security of the information your customers are storing. 
• Sending messages that include what you are doing to increase the security of stored information. 
• Offering frequent app updates. 
• Staying up-to-date with offerings and features from your competitors. 
• Educating your customers about online fraud. 
• Sending digital receipts, and proof of payment, in a timely manner.

Of course, you should also protect yourself from fraud and scams. You won’t always be able to recognize online payment fraud, but there are often warning signs. Payment fraud is especially important for small businesses because of their lower cash flow. 

Remember that payment fraud commonly appears as smaller transactions or repeated attempts, not always a single large transaction. For more on fraud, check out this resource. 

Card Readers for Local Businesses 

With their ability to anchor your point of sale in your store or take transactions on the fly, card readers are changing the way local businesses effectively process and track their payments. And they’re offering customers more flexibility and options than ever before. 

With that said, credit cards continue to be a popular option, especially among high-salary customers. According to our State of Payments report: 60% of high-frequency consumers chose credit card payment options as their top choice, compared to 47% of low-frequency consumers.

What is a POS System?

POS stands for “point of sale” and is used to process transactions for retail customers. It can be a physical transaction terminal in a store or an online checkout point. Many POS systems are becoming cloud-based for the purposes of tracking and processing purchases. 

Your POS is not only a payment processor, but should also be a data collector. You can collect key information on your customers’ purchasing habits and trends, just by having the right card processor. 

With card readers, customers can pay with a swipe, tap, insert, or text. The best part? You can capture all of the payments you collect, remotely or in-person, in one place. Card readers allow you to securely track all of your transactions digitally and understand your customers’ habits and buying cycles. They also allow you to blur the line between in-person and digital transactions, making for a seamless, modern customer experience.

In-Store vs. Mobile Card Readers: What’s Right For Your Business? 

When it comes to evaluating in-store and mobile card readers, various factors go into selecting which one is right for your business. 

A mobile card reader is a payment option that lets you process credit cards on the go. These can either be plugged directly into a phone or connected over Bluetooth. 

From a practical application standpoint, mobile credit card readers allow you to:

• Provide services in customers’ homes, like for roofers or contractors
• Operate outside of a physical location, like at a fair or expo
• Or make deliveries to their customers

In-store readers are the stationary options that you’ll usually find at a front desk in brick-and-mortar stores for in-person transactions. These card readers are not necessarily designed to be mobile, although there are options for a portable credit card reader that is also appropriate for in-store use.

Some in-store card readers will need to connect to your internet via an ethernet cable or even to your landline. However, some can use the same wireless connection that mobile credit card readers use. 

The advantage of an in-store credit card reader is that customers can use it to do more with every purchase, like opting into campaigns or leaving a tip. The limitation is that point-of-sale stations are not portable. 

With these elements in mind, make sure to carefully evaluate and examine the specific needs of your business and daily transactions:

• Are you often on the go? 
• Do most of your transactions occur in-store or in the field? 
• What would be most convenient for your typical customer? 

Your choice should not only reflect your business operations, but your ideal customer’s preferences as well. 

Buy Now, Pay Later for Local Businesses 

As a consumer yourself, you’ve probably caught on to the “buy now, pay later” trend. Local businesses are offering more and more options to help their customers purchase as immediately as possible.

Customer Financing 101

Customer financing involves a business offering financing options to its customers using its own funds or those of a lending specialist (bank or company). Providing this option can increase convenience for your customer as well as buyer capacity, making them more likely to engage. Like anything involving lending money, there are factors a business should take into consideration before deciding if offering financing is the right move for them.

When considering customer financing, it is crucial to understand how your processes will function on a daily and long-term basis. When starting out, you should carefully evaluate:

• What kind of financing will work best for your business
• Which financing provider will best serve your business 
• How you want to advertise your financing options to your customer base
• How you will keep track of bills and accounts 

It’s important to note that lenders will charge a fee—usually a cut of the sales that they help finance. As always, you should carefully consult your financial team when making these decisions. 

What is Buy Now, Pay Later (BNPL)? 

Buy now, pay later (or BNPL) is a flexible payment option that allows customers to purchase an item with partial payments and pay the full amount over a series of installments. 

In technical terms, a BNPL is a point-of-sale installment loan or a type of short-term financing available at checkout. With BNPL, customers can purchase products they otherwise wouldn’t, or accelerate their timeline for purchasing because they can secure the item sooner–even before they have the full amount available to spend. 

Below we see an example of Podium’s partnership with Affirm, a leader in BNPL, in action. 

BNPL options are attractive to customers because they are budget-friendly. It puts the power of spacing out larger payments in the hands of customers. This allows customers to commit to higher-value purchases more often.  

And, unlike traditional credit cards or lines of credit, customers don’t usually have to undergo a hard check on their credit report, which makes BNPL a lot easier and faster as a loan option than other forms of credit. In times of economic uncertainty and rising inflation costs, more and more customers lean on BNPL to make purchases.

Simple put, BNPL offers:

• Flexible financing: Low- and no-interest options available. Most customers get approved in minutes.
• Immediate payments: Merchants receive the full transaction amount upon purchase.
• More revenue: Merchants using BNPL options at checkout like Affirm see an 85% increase in average order value.

Buy Now, Pay Later Use Cases

Customers may find BNPL appealing at various stages in their experience with you; sometimes, this option can be just the thing to tip the scales from consideration into a sale. However, it’s vital to understand when to use this tool so that you don’t overextend your business finances.

Some common use cases include:

• Holiday shopping. With the holiday season coming up, BNPL is a great way to promote your seasonal products and support a specific campaign you are running. 
• More expensive, long-term products. When consumers buy items such as mattresses or laptops, they know they’re making an investment in something they expect to be long-term and offer significant value. Offering BNPL can convince them to buy something with higher value in the category they are shopping in by increasing their buying power and matching the timeline of their product use, increasing perceived value. 
• Trend products or product editions. With trend products, time is of the essence. Consumers don’t want to save in order to purchase because by the time they have accumulated the money, the popularity may have passed. Consider advertising your trend products with BNPL to capitalize on consumer urgency. 
• Unexpected purchase: Say your car breaks down, or your water heater is acting up—these are unexpected purchases that can be difficult to account for in your monthly savings. Giving customers options to cover these “act of God” moments when they need you most can only strengthen your relationship with the local community.  

Buy Now, Pay Later Best Practices & Compliance

Businesses that offer BNPL see increases in sales, reduced rates of cart abandonment, and higher average order totals. Read on for some of our tips on how best to provide BNPL for your customers.

Customize: Tailor BNPL Options to Your Target Audience

Who is your target customer, and what do they want in their payment flexibility? Take a look at your average order value (or AOV). If your AOVs are over a couple thousand dollars, your customers are more likely to be looking for installment loans. AOVs less than a few hundred dollars are best addressed by offering split payment options. 

Timing is Everything: Offer Timelines Customers Want and Expect

For split payments, businesses usually have customers pay in four installments over six weeks. While this timeline is pretty standard, installment loan repayment periods can be more customized. Customers like having options, so try offering 12-month and 24-month repayment periods if it makes sense for your business and audience. More flexibility and options usually lead to more purchases. 

Interested in Interest Rates: How Low Can You Go?

As a business owner, you get to decide which interest rates you’ll offer your customers. While most customers obviously prefer 0% APR, you can adjust your interest rates by loan period or product type. You should always consult your financial team and long-term data and possibly even scope out your competition when making this decision.

Inform Customers: Communication is Key

It is in your best interest to make your customers aware that you offer BNPL options. The more aware your customers are, the more likely they are to use this purchase option. Letting them know earlier in the game is also beneficial because it sets the tone for the way they’ll shop. Knowing that they can purchase with BNPL often makes customers willing to purchase more; many use it as a factor when mentally budgeting their purchase. 

You can advertise your new BNPL options through banner ads on social media and in your purchasing app, on your website and landing pages, on your product detail pages, and perhaps most importantly of all, at checkout. You can also heavily promote BNPL in seasonal ads, especially in the holiday season when the pressure is on and customers are looking for ways to spread out payments over a longer timeline. 

Keep it Clear: Make Sure Your Customers Understand

It’s likely you’re collecting data on every customer and their online purchases. While this is great for making sure you have as much information as possible, don’t be shady about letting customers know how it works. 

Take a look at the BNPL experience from your customer’s eyes. Is your business hiding crucial information in Terms of Service agreements, dropdown menus, or small icons that are inconvenient to click into? Make sure your customers understand how BNPL works and what they’re agreeing to when it comes to customer financing. 

Be Responsible: Your Customer has Rights

The Federal Trade Commission (or FTC) protects customers’ rights, whether they’re purchasing through BNPL or any other form of payment option. This goes without saying, but keep your business clean. If you’re offering BNPL payment options to your customers, make sure you know what you could be held liable for. 

For example, it’s your responsibility as a business owner to ensure that your customers receive timely refunds, even if they’re returning something that was purchased through BNPL. How you treat people who use customer financing matters.

Represent Fairly: Be Real with Customers About Cost

It’s important to help your customers feel like they’re getting good value for what they pay. However, this should never come at the sacrifice of honesty. Any claims you make about BNPL need to be true for the typical customer. 

This means that if your typical customer is likely to accrue fees through your Buy Now, Pay Later payment option, you can’t advertise it as being “zero cost.” Keep your cost advertisements targeted to your typical customer so that you can stay in the clear legally.

Final Thoughts

As we’ve noted, consumers expect a seamless, secure, and convenient payment experience that meets them where they are. With 85% of US citizens being smartphone owners in 2021 – compared to a mere 35% in 2011 – this means seriously considering how your billing and payment methods accommodate not only your customers’ needs, but their mobile and digital preferences as well. 

In fact, the way payment preferences are trending in our modern marketplace, the way you process payments may very well be the thing standing between you and raising your bottom line.

Modernizing your payments not only appeals to new customers who are considering purchasing from you, but also helps current customers pay their outstanding accounts faster as well–increasing your cash flow and ensuring that you have funds when you need them. 

In coming years, more and more traditional payment methods will not only fall out of style, but also become less secure as an increasingly technological marketplace continues to take hold. Unsurprisingly, digital payment options are only expected to increase. And your customers’ expectations for modern, digital payment options will only increase as well. 

It’s clear that adaptation is no longer a concern reserved for businesses with extra room in their budget or businesses that just want to “keep up” with the fashionable trends. Local businesses have to adapt–and adapt quickly– to their customers’ ever-changing preferences. If they don’t, they run the risk of becoming irrelevant. In the case of payment methods, this includes losing revenue. 

Ready to catch up? Podium Payments is a multi-functional payment platform that allows you to meet every customer payment preference, off or on-site, and tap into the opportunities present in every transaction. Get started here.